Sustainability and Public Policy

1. Sustainability and Public Policy MPA Program ATPS Spring 2010 Dzieza/Geri/Gould

2. How do YOU define “sustainability?”

3. Defined, explored… “We do not inherit the earth from our ancestors. We borrow it from our children.” Haida Proverb Sustainable development “meets the needs of the present without compromising the ability of future generations to meet their own needs.” - 1987, World Commission on Environment and Development (a.k.a the Brundtland Commission)

4. Another try…. “using, developing and protecting resources in a manner that enables people to meet current needs and provides that future generations can also meet future needs, from the joint perspective of environmental, economic and community objectives.” - “The People of the State of Oregon” Chapter 918 of Oregon Laws 2001

5. Other definitions…. • Newton, Business Ethics …. “…seven generations away, a path chosen still seems to be the correct one.” (p. 81); “the ability to continue a profitable practice indefinitely without having an environmental limit suddenly appear to end it.” (p. 144) • UNESCO: “Every generation should leave water, air and soil resources as pure and unpolluted as when it came on earth.” • “Every generation should leave undiminished all the species of animals it found existing on earth.” • Robert Solow (and others): “Preserving the capacity of future generations to be at least as well off as this generation.”

6. Why the concern? • Unsustainable environmental and social trends: HIPPO • Habitat destruction • Invasive species • Pollution • Population. More people means more of the other HIPPO effects. • Over harvesting

9. Per capita CO2 emissions, by country and population

10. “Waste” is extensive • 3% of the Btu value of coal becomes usable light • 5% of a palm oil plant gets used to make detergent • 8% of the sugars in barley are fermented to make beer • 0.2% of the coffee plant becomes coffee we drink • ~60% of the materials used become waste before they enter the economy • Civilization relies on energy: 200 mboe per day; energy systems (oil, natural gas, coal, nuclear) are vast, unequal, unstable • Since we started using fossil fuels, we have released 400 billion tons of carbon into the biosphere

11. But…. • How can anyone be against “sustainability”? • In order to make sense of the concept, we need to understand our implicit and explicit assumptions • How might we as humans value the natural world? • How might we define values inherent in nature? • Where does economics fit in? • What are the implications for environmental policy?

12. Policy/Value continuum for Earth’s resources • Unlimited Exploitation – monetary values, profit • Wise use – we also value externalities, costs and benefits borne by and generated for others • Conservation – value in non-market uses, e.g., recreation • Preservation – value in keeping things natural, non-use…..may want wilderness even if you don’t use it

13. To what extent do we value Nature? • Assigning rights to animals – animals have rights independent of human values • Assigning rights to ecosystems – whole ecosystems have rights • Community holism – humans as just another part of the ecosystem, mutuality between humans and other ecosystem elements • Deep ecology – living by natural laws, reduce populations. Humans as an uncontrollable cancer on the planet

14. What??!! • Some of these preferences leave humans out of the equation • Is there a “best” preference? • Do policy analysts/entrepreneurs make these preferences explicit?

15. Should “man” have…. • “…dominion over all the earth.”? (Genesis 1) • The “anthropocentric” philosophical tradition can be traced back to the Bible and beyond….through Francis Bacon, J.S. Mill, Jeremy Bentham, Adam Smith to economist Julian Simon and many others • It’s our duty to develop the earth • Value of nature and its products is based on their usefulness to humans

16. The Nature-first ethic • …also has a distinguished if less well known pedigree • English regulated polluting industry • Thoreau; John Muir • US and creation of national parks • Aldo Leopold; Rachel Carson • James Lovelock’s Gaia Hypothesis

17. Policy analysis for environmental decisions • Clarity about likely policy outputs and outcomes • Assessments based on scientific evidence • Estimates of costs and benefits • Likely implementation problems • Economic analysis • Intergenerational analysis • Explicit discussion/analysis of values is often omitted

18. What values do we emphasize? • US tends to be pragmatic: we assess ideas, hypotheses based on what we believe will be their practical consequences • We are also a relatively instrumental society. Something has instrumental value if and only if it has value as a means to promote some ends. • We value ends (goals) and means (ways to attain those goals) • The “grand narrative” of US public administration… to create efficient and effective government….is firmly in this tradition

19. What has intrinsic value for us? • Something has intrinsic value (or non-instrumental value) if and only if it has value regardless of whether it is also useful as a means to promote other ends. • We have a difficult time identifying what we value intrinsically • Do we value “nature” or “conservation” (ecosystems, butterflies, my cat) in their own right, or because they bring us identifiable and measurable benefits? • Most arguments for environmental protection are based on instrumental values.

20. Economics: Solow’s analysis • Complex environmental issues have a long time frame • What obligations do we have to future generations? Distributional equity—between current/future humans • But: we know little about the technology that will be available 100 years from now • We will create a built environment with plant, equipment, technological knowledge • Resources are fungible to a large extent • Can’t rely on “the market” as future generations aren’t involved in current market transactions

21. Discount rates and time horizons • Costs of a policy/project are usually incurred immediately • But we have a clear time preference….as consumers we are impatient and prefer immediate over postponed consumption. • We won’t trade $1 now for only $1 a year or more from now—but want to be compensated for deferred consumption. A dollar of cost/benefit generated in the future is worth less • As a result, streams of benefits and costs in the future are usually discounted • Real interest rates (adjusted for inflation) are historically between 3-5%

22. Discount rates and present values • A low discount rate reflects society’s concern for the future, since future benefits will have a higher value • Higher discount rates minimize future benefits and suggest that current projects/expenditures foregone (often private ones) have a higher value • At a 5% discount rate, $1 to be received 25 years from now is worth only 29 cents • At a 1% discount rate, $1 to be received 25 years from now is worth 77 cents

23. Present value of $1000

24. From an economist’s perspective… • Thinking about sustainability means considering how to value current consumption vs. saving for the future • We can conserve renewable resources, using a disciplined approach, for trees, soil, other biotic resources… • A sustained yield of these is possible, with strong governance, ownership • More difficult with “common pool” resources such as ocean fish • But how about non-renewable resources?

25. Solow’s critique • “….when we use up something that is irreplaceable…. then we should be thinking about providing something of equal value.” (Solow, 1991, p. 184) • Oil, natural gas, etc., should be invested, not consumed. They can be converted into forms that provide benefits over an extended period • These forms include built capital, knowledge, technology • Avoid consuming irreplaceable natural capital (e.g., oil) that provides no future benefits • A process of substituting natural capital with built capital and knowledge

26. His comparison • UK: Consumed North Sea oil • Norway: Invested its proceeds from North Sea oil

27. And a moral dilemma… • Inequality is common, within and between countries • The poor want current consumption, not investment • Can we justify telling those now not consuming that we need to deprive them to protect future generations? • Are current high consumers willing to decrease their consumption?

28. Solow’s definitions • Weak Sustainability – preserving options for future generations…. • “sustainability…is the obligation to preserve the capacity to be well off…as well off as we.” • Strong Sustainability– leaving resources undiminished • Solow is skeptical that strong sustainability is either possible or desirable • But… Some functions of the environment cannot be duplicated by humans, e.g., ozone layer, The Amazon

29. An Example • Discounting and climate change: How do we compare present-day gains and losses with gains and losses a hundred years in the future? • A very high carbon price will drastically cut global output, imposing an immediate cost • Stern Report: rejects the idea of discounting future costs and benefits when they are compared with present costs and benefits. • Discounting is unethical in this case because it discriminates between present and future generations. It imposes excessive burdens on future generations. • Immediate action is needed now to prevent catastrophe

30. Consequences…. • Assuming current technology, China, India, remainder of the high growth developing would sacrifice substantial growth and improvement in living conditions • New growth paths would need to be created for low consumption societies

31. Nordhaus’ rejoinder: • Discounting is necessary in order to find a reasonable balance between present and future. • Discounting is fair because a dollar generated through economic growth, and saved by the present generation becomes fifty-four dollars to be spent by our descendants a hundred years later. • Policy options: mitigation and adaptation. • Having more wealth in the future will make adaptation more affordable. How much costly mitigation is essential now, given our lack of understanding of natural systems?

32. What Types Of Solutions? • Government Fiat/Regulation • Market-based solutions • Policy criteria: speed of implementation, extent of compliance, overall effectiveness, incentives for innovation and resilience, transition costs • Example: • Burn No More Coal—by government edict • Vs. • A High Carbon Tax

33. Regulatory vs. Market Solutions • Problems with regulation • Relatively static; world is dynamic • We have difficulty anticipating all possible outcomes of a policy, pro or con, so gaps in regulatory coverage are almost inevitable • …unintended consequences occur • It’s very difficult to estimate costs and benefits of a proposed policy ex ante • Costs and benefits are allocated politically

34. Problem with markets • They tend to favor those with resources • May be subject to overshooting, • Can be gamed • Often don’t work when monopoly power…. • Externalities… • Public goods…. • Common property resources (oceans, air) are at issue • Long-term consequences are usually not considered.

35. Framework for Considering Environmental Policy Proposals • Values: Anthropocentric vs. Nature-centric • Discount rate: Low vs. High  • Sustainability: Weak vs. Strong • Preferred solution type: Regulatory vs. Market • Allocation choice: Immediate consumption vs. Investment • Impacts on Inequality: Reduce current inequality or mitigate future environmental harm by limiting growth and ignoring inequality

36. How do we change our thinking, our systems? • Individual change • Systemic change: scale and scope of change required are daunting • May inspire paralysis and inaction

37. New Thinking Is Needed.. • From • short-term thinking • an economy outside of nature • a linear flow of resources • fossil fuels • scarcity emphasis • To • long-term thinking • an economy integrated with nature • a systems flow of resources • solar-derived energy • abundance emphasis

38. What Can We Do? • Believe that change is possible • Encourage higher density urban living • Mass transit • Apartments/condos, not houses • Jobs near population centers • Transition in our energy economy: end subsidies • Economy/society move to a greater emphasis on services, social interaction, less on material consumption

39. What Can I Do? • Save more; consume less • Ride the bus • Eat food grown locally • Minimize plane travel • Compact florescent lights, green power • Insulate your house and keep heat low • Recycle and use recycled products. • Lobby for change

40. Workshop • Form small groups. • Pick an organization with which you work or volunteer. • Identify a sustainability challenge faced by that organization. • How can the organization mobilize to meet that challenge?

41. Sources • Bruner, Bill. Winter 08 lecture notes on sustainability • Newton, Lisa (2005). Business Ethics and the Natural Environment. New York: Wiley-Blackwell. • Nordhaus, William (2008). A Question of Balance: Weighing the Options on Global Warming Policies. New Haven: Yale University • Solow, Robert M. (2000). "Sustainability: An Economist's Perspective." Lecture to the Marine Policy Center, Woods Hole Oceanographic Institution, Woods Hole, MA, June 14, 1991. In Stavins, Robert, Ed. Economics of the Environment: Selected Readings. 4th ed. New York, NY: W. W. Norton. • Stern, Nicholas (2007). The Economics of Climate Change: The Stern Review. Cambridge: Cambridge Univ. Press.